Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ meat industry tie-up stumbled on differing strategies

NZ meat industry consolidation stumbled on differing strategies, uncommitted farmer suppliers

By Tina Morrison

Aug. 21 (BusinessDesk) - New Zealand meat companies abandoned efforts to consolidate and reduce surplus capacity last year because they lacked an agreed export strategy and farmers wouldn’t commit stock to firms that closed plants, industry sources say.

The country’s four biggest meat processors - farmer owned cooperatives Silver Fern Farms and Alliance Group, accounting for about half the industry, the Talley’s Group family-owned Affco and ANZCO Foods, with a majority ownership held by a Japanese food company - ended talks after failing to reach agreement last year.

A proposal for competitors to share the cost of closing plants was rejected, as was a plan for each company to retain its stock volumes for a period of up to five years following a closure, so they weren’t disadvantaged, according to people involved in the talks, who asked not to be named.

The fragmented industry ownership and lack of agreement about how to market New Zealand meat overseas hindered the meat companies from conforming to a model which locked in supply, especially amongst the 17 odd smaller exporters who would need to broadly agree to consolidation. Meat companies are using different strategies to market their product to the world, ranging from Silver Fern Farms’ branded cuts for the supermarket shelf, to Affco’s high-throughput model, making it difficult to reach consensus.

Meanwhile, farmers, who play meat companies off to get the best farmgate returns, were advised not to commit stock through long-term agreements to support meat companies who were reducing capacity, on concern it would reduce competition, the people said.

The cooperatives face tension from their farmer shareholders wanting higher farm gate prices for the stock they supply versus the longer term gains they could obtain from retaining earnings in the business to reinvest in marketing and product development, to build higher returns for the future.

New Zealand meat companies haven’t significantly reduced their processing capacity even as sheep numbers fall. New Zealand sheep numbers fell below 30 million this year, from a peak of about 70 million in 1982, according to Beef + Lamb New Zealand’s Economic Service.

Meat is the nation’s second-largest commodity export, worth about $5.6 billion a year, behind dairy products at $15.8 billion, according to government figures.

Processors are competing for the diminishing supply, as increased throughput of livestock makes their plants more efficient. That means in times of scarce supply, farmers are paid a higher price for their livestock which bears little relationship to what the final consumer is prepared to pay as processors avoid having their plants sit idle.

Dunedin-based Silver Fern Farms, which had $2 billion of annual sales last year, will probably provide an update on a PriceWaterhouseCoopers strategic review of the business in its annual report published towards the end of this calendar year. The review, which focused on future options following the stalled industry aggregation discussions, was presented to the meat company’s board in February.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Revenue Renewal: Tax Modernisation Programme Launched

Revenue Minister Todd McClay today released the first two in a series of public consultations designed to modernise and simplify the tax system. More>>

ALSO:

Scoop Business:
NZ Puts Seven New Oil And Gas Areas Put Up For Tender

A total of seven new areas will be opened up to oil and gas exploration under its block offer tendering system, as the New Zealand government seeks to concentrate activity in a few strategically chosen areas. More>>

ALSO:

Half Full: Dairy Payouts Steady, Cash Will Be Tight

Industry body DairyNZ is advising farmers to focus on strong cashflow management as they look ahead to the 2015-16 season following Fonterra's half-year results announcement today. More>>

ALSO:

First Union: Cotton On Plans To Use “Tea Break” Law

“The Prime Minister reassured New Zealanders that ‘post the passing of this law, will you all of a sudden find thousands of workers who are denied having a tea break? The answer is absolutely not’... Cotton On is proposing to remove tea and meal breaks for workers in its safety sensitive distribution centre. How long before other major chains try and follow suit?” More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news